India’s real estate industry is one of the fastest-growing industries and has a sizable impact on the national economy. The government has established some basic laws to regulate the real estate industry due to the increase in properties in Mumbai.
We will go over the five fundamental laws that govern India’s real estate
The Real Estate Act, 2016
In India, the real estate industry is governed by the Real Estate (Regulation and Development) Act, 2016, also referred to as RERA. The law was put into place to protect the interests of home buyers and bring transparency and accountability to the real estate industry. According to this law, developers must register their projects with the regulatory body and provide all relevant information about them, including the location of the project’s land, its specifics, a floor plan, etc.
According to the law, developers are prohibited from promoting their projects before registering them with the appropriate regulatory body. This guarantees prospective homeowners learn accurate information about the project before investing.
The Indian Stamp Act, 1899
Another important law that controls India’s real estate market is the Indian Stamp Act of 1899. All real estate transactions in India are required by law to be registered and stamped with the government. Home buyers must pay the stamp duty as a tax on the real estate transaction. The cost of stamp duty varies from state to state and is determined by the price and location of the property.
In comparison to other Indian cities, Mumbai has higher stamp duty rates. In Mumbai, the current stamp duty rate is 5% for female buyers and 6% for male real estate buyers. All real estate transactions are required by law to be registered with the authorities.
The Transfer of Property Act, 1882
An essential legislation that controls real estate transactions in India is the Transfer of Property Act of 1882. The different forms of property ownership, including joint ownership, tenancy, leasehold, etc., are defined by law. The law also specifies the procedures to be followed when transferring property ownership from one party to another.
According to the law, all real estate transactions must be documented with a registered deed that contains all relevant information. Both the buyer and the seller must sign the deed, in presence of 2 witnesses.
The Income Tax Act, 1961
An important legislation that controls how India taxes real estate transactions is the Income Tax Act of 1961. Homebuyers are required by law to pay income tax on the value of the property at the time of purchase. The law also offers tax advantages to homebuyers who use a mortgage to finance their transaction.
Buyers of homes in Mumbai are eligible for tax benefits under Sections 80C and 24 of the Income Tax Act on both the principal and interest paid on their mortgages. The law also stipulates that if a homeowner sells their home within three years of purchase, they must pay capital gains tax.
The Goods and Services Tax (GST) Act, 2017
The Goods and Services Tax (GST) Act, 2017, a recent law, controls how real estate transactions are taxed in India. The law requires homebuyers who purchase properties still under construction to pay GST. The location and value of the property both affect the GST rates. In Mumbai, the current GST rate for properties still under construction is 5%.
The law also grants homebuyers an Input Tax Credit (ITC). ITC is the tax credit real estate purchasers can claim on the GST they paid on the supplies and labour used to build the property.
In conclusion, several fundamental laws that safeguard the interests of builders and home buyers govern the real estate industry in India. Some of the basic laws that regulate the real estate industry in India include the Real Estate Act of 2016, the Indian Stamp Act of 1899, the Transfer of Property Act of 1882, the Income Tax Act of 1961, and the Goods and Services Tax (GST) Act of 2017.